-- Just need part b answered, please. Bob\'s Baskets, Inc., manufactures and sel
ID: 2375557 • Letter: #
Question
-- Just need part b answered, please.
Bob's Baskets, Inc., manufactures and sells two types of baskets, deluxe and standard. Last year, Bob's Baskets had the following costs and revenues:
Bob's Baskets currently uses labor costs to allocate all overhead but is considering implementing an activity-based costing system. After interviewing the sales and production staff, management decides to allocate administrative costs on the basis of direct labor costs but to use the following bases to allocate the remaining overhead:
Complete the income statement using the preceding activity bases. (Note: Due to rounding the Overhead costs allocated will not add up.) (Round your percentage to 2 decimal places and final answers to nearest dollar amount. Input all amounts as positive values. Operating loss amount should be indicated with minus sign. Omit the "$" & "%" signs in your response.)
Compute Operating profit for Bob's Baskets using direct labor costs as the only overhead allocation base. (Do not round "Allocation rate", round the final answers to the nearest dollar amount. Operating loss amounts should be indicated with minus sign. Omit the "$" sign in your response.)
Income Statement Deluxe Standard Total Revenue $ 146,000 $ 169,000 $ 315,000 Direct materials 19,000 21,000 40,000 Direct labor 75,000 46,000 121,000 Overhead costs Administration 21,780 Production setup 39,000 Quality control 21,420 Distribution 19,530 Operating profit $ 52,270
Explanation / Answer
Total overhead cost = 21,780 + 39,000 + 21,420 + 19,530 = $101,730
Overhead cost allocated to Deluxe = 101,730 x 75000/121,000 = $63,055.79
Overhead cost allocated to Standard = 101,730 x 46000/121,000 = $38,674.21
Operating LOSS for deluxe = 146,000 %u2013 19,000 %u2013 75,000 %u2013 63055.79 = -$11,056
Operating profit for Standard = 169,000 %u2013 21,000 %u2013 46,000 %u2013 38674.21 = $63,326
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